Foreign direct investment is essential for a country’s economy. It boosts the country by bringing more money into the market, infusing competitiveness and creating employment opportunities. Canada encourages FDI by promoting its global market presence, access to resources, availability of a highly skilled workforce, and robust economic policies, and many large Fortune 500 companies are establishing new R&D setups here. Proximity to the United States makes the United States its largest investor.
What is Foreign Direct Investment?
Foreign direct investment (FDI) is when a company from one country invests in a business in another country. The investment can be in the form of a branch, subsidiary, or joint venture. The company may buy property or businesses in another country to establish a presence or invest in stocks or bonds. FDI can be an important part of helping developing countries grow and improve their economies.
Top 5 Ways to Increase Foreign Direct Investment in Canada
Showcase Canada’s Strengths
Canada has an investment promotion agency (IPA) called “Invest In Canada,” which does the job of marketing the factors that make Canada a favorable place to do business. It also provides all the information foreign investors need. They unlock investment opportunities by working directly with global investors. They target suitable foreign investors and coordinate operations between investors and government partners to make the expansion to Canada seamless. The IPA could also keep a check on after-investment care and urge investors to make re-investments.
Support Export Processing Zones
The export processing zone, or the foreign trade zone (FTZ), is a special economic zone where goods are produced and exported without paying import tax. It is to attract foreign direct investment (FDI) from multinational corporations to produce goods for export. Canada also lets businesses select the location that best suits their needs. Canada’s geographically flexible strategy outperforms other nations concentrating on location-specific foreign trade zones.
Setup a Vendor Development Program
A vendor development program (VDP) is an effective tool that improves FDI. VDP’s primary goal is to assist small and medium-sized enterprises (SMEs) in improving their quality and competitiveness. The program helps SMEs improve their management skills, develop business strategies, and increase productivity. It will allow them to increase their exports and attract foreign investment.
Support and Encourage Scientific Research
Canada improves its FDI attractiveness by supporting scientific research and development (R&D) in the country. It will help Canadian companies develop new products and services that can be sold internationally. It will also give them access to new intellectual property rights, which they can use as collateral when approaching potential investors. Many steps have already been taken by the Canadian government.
Improving Financial Market
Strengthening the financial markets in both the source and host countries plays an important role in improving FDI. The Bank of Canada, which is the nation’s central bank, plays a key role in enabling economic stability and growth and building efficient financial systems.
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